The agribusiness sector has just gained a new financing instrument for its production chain. This is the Investment Fund in Agroindustrial Production Chains, or FIAGRO, created by Law No. 14,130, of March 29, 2021.[1]

In 2020, Brazil remained one of the main suppliers of commodities agriculture in the world, according to IPEA (Institute of Applied Economic Research). Soybeans in grains and bran, beef, pork and chicken, sugar, coffee and cotton were highlighted. Factors such as the devaluation of the real against the dollar, the increase in global demand and local production (there was a record soybean harvest in the 2019/2020 biennium), the trade war between the U.S. and China and the crop failure of competing countries boosted the good performance of the sector,[2] which is the most relevant in terms of positive contribution to the Brazilian trade balance.

As explained in the explanatory memorandum to the bill that created FIAGRO,[3] agribusiness has been seeking a transition from a financing model based on government subsidies to one that relies on private credit, since the federal government's fiscal restrictions impose increasing reduction of available resources. This is already happening with large producers that have easier access to the financial and capital markets. As an example, in 2020, the primary market for Agribusiness Receivables Certificates (CRAs) reached an all-time high of R$ 15.81 billion.[4] Although strongly concentrated on corporate debt of a single debtor, this alternative also shows growth potential for pulverizes risk credits and financing from small and medium-sized producers.[5] Another example of the industry's progress in this direction was the editing of the Law No. 13,986/20 (as a result of the conversion of a Provisional Measure focused on Agribusiness sector into law), which should still show its full potential for the expansion and consolidation of agribusiness financing by the private sector in the coming years.

Thus, FIAGRO emerges as an alternative to expand the financing of Brazilian agribusiness, after a quick process in the National Congress and partial presidential sanction, with a veto. Its main characteristics are explained below.

  1. Regulation by CVM: FIAGRO's shares are securities, thus attracting the regime of Law No. 6,385/76,[6] and the competence of the Brazilian Securities Commission (CVM) to authorize, discipline and supervise the constitution, operation and administration of the fund. It is expected that, soon, the CVM will issue a regulation to discipline FIAGRO, subject to the law’s guideline.
  1. Target assets: FIAGRO may invest in the assets listed below:[7]
  • rural properties, which may be leased or disposed of by the fund;
  • shares of companies that explore activities that are part of the agro-industrial production chain;
  • financial assets, credit securities or securities issued by individuals and legal entities that are part of the agro-industrial production chain (including, thereby, the Rural Product Card (CPR), the Agribusiness Credit Rights Certificate (CDCA), the Agribusiness Letter of Credit (LCA), the Agricultural Deposit Certificate (CDA), the Agricultural Warrant (WA), the Rural Real Estate Note (CIR);
  • agribusiness credit rights and securitization bonds issued backed by agribusiness credit rights, including CRAs and Credit Rights Investment Fund quotas (FIDCs) - standardized and non-standardized - that invest more than 50% of their equity in credit rights agribusiness;
  • real estate credit rights relating to rural properties and securitization securities issued backed by these credit rights, including CRAs and Credit Rights Investment Fund quotas - standardized and non-standardized - that invest more than 50% of their equity in said real estate credit rights; and
  • investment fund shares that apply more than 50% of their equity to the assets listed in the assets listed above.
  1. Administration: as occurs with Real Estate Investment Funds (FIIs), FIAGRO must be managed by an administrator institution authorized by CVM that is necessarily a multiple bank with an investment portfolio or with a real estate credit portfolio, investment bank, real estate credit company, brokerage company or a company distributing bonds and securities, or other legally equivalent entities.[8] The institution will have the competence to represent FIAGRO actively and passively, judicially and extrajudicially and also to respond personally for the eviction of rights, in the event of the sale of property by the fund[9], in addition to being responsible for mismanagement, reckless management, conflict of interests, non-compliance with the regulation of the fund or determination of the general meeting of shareholders.[10]

FIAGRO's assets will be acquired by the administrator, on a fiduciary basis, and the real estate, and fruits and income arising therefrom, will be held under the administrator's fiduciary property. FIAGRO's assets and rights do not communicate with the assets of the administrator and, therefore, (i) are not part of its assets, (ii) are not directly or indirectly liable for any of its obligations, (iii) are not part of its assets and rights, for the purpose of judicial or extrajudicial liquidation, (iv) cannot be pledged as a guarantee for the debit of its operations, (v) are not subject to execution by any of its creditors, however privileged they may be, and (vi) cannot any real liens on the properties may be incurred. [11] Consequently, the administrator is required to include in the purchase title the restrictions indicated in the items above and that the property acquired is FIAGRO's property, noting that this must also be included in the registration of the rural property at the Real Estate Registry Office[12]. Since the property is FIAGRO's property, the administrator does not need to present the Certificate of Debts Relating to Federal Tax Credits and the Active Debt of the Union on the occasion of the sale of the property in question.[13]

In addition, considering that the administrator is responsible for good management, according to a standard of conduct guided by objective good faith, the same limits were adopted to ensure an adequate management of the resources of the quota holders who will invest in FIAGRO, being prohibited, in this sense, that the administrator:

  • grant loans, future income to shareholders or open credits under any modality;
  • provide surety, surety, acceptance or co-obligation in any form;
  • invest abroad funds raised in the country;
  • invest the funds in the acquisition of quotas of the fund itself;
  • sell the installment of the fund's quotas, allowing the division of the issuance into series;
  • promises predetermined income to shareholders;
  • carry out operations of the fund when there is a conflict of interest between the fund and the managing institution, or between the fund and the entrepreneur.[14]
  1. Payment of quotas: FIAGRO's quotas can be paid in assets and rights, and payment in rural properties is permitted provided that they have been previously evaluated by a professional or by a specialized company[15]. Initially, it was considered a deferral of the taxable event of the capital gain on the quotas paid in with rural property for the date of sale of these quotas, instead of the moment of payment. But, as we will see below, the provision was vetoed by the President of the Republic based on the Fiscal Responsibility Law (although the veto may still be overturned by the National Congress). In principle, if the veto is not lifted, the payment of FIAGRO's quotas with a rural property assessed by a professional or by a specialized company is a taxable event of the capital gain, as is currently the case with Investment Funds in Participations.

In FIAGRO, as in Real Estate Investment Funds, the investor is protected from liabilities arising from the rights in rem that are part of the fund's portfolio, since he will not personally answer for any legal or contractual obligation in relation to the rural properties belonging to FIAGRO or its administrator, nor may he exercise real rights over the properties in question. The obligation of the investor is, therefore, limited to the payment of the quotas subscribed by him, serving the subscription bulletin as an extrajudicial enforcement order capable of supporting an execution action for collection by the administrator, or the sale of unpaid quotas to third parties.[16]

  1. Form: FIAGRO may be constituted in the form of an open or closed condominium.[17]
  1. Categories: the standard made room for the regulation of FIAGRO categories according to the target audience and the nature of the fund's investments.[18]
  1. Fund regulation: as with other fund modalities, FIAGRO will be structured through a bylaws, the minimum content of which is disciplined by law:
  • qualification of the managing institution;
  • investment policy that establishes, with precision and clarity, the definitions of the assets that will make up the fund's assets to meet its objectives;
  • entrance fee or criteria for fixing it;
  • remuneration of the administrator;
  • disclosure of information to shareholders, observing the deadlines set by the CVM;
  • expenses and charges of the fund;
  • competence and quorum for deliberation of the investors' general meeting;
  • criteria for subscription of shares by the same investor;
  • the term of the fund and the conditions for redemption for the purpose of settlement;
  • other specifications, aiming at market surveillance and clarity of information, in the form of regulations to be edited by the CVM; and
  • criteria related to the distribution of income and capital gains.

All of these requirements are also applicable to Real Estate Investment Funds[19].However, it is important to highlight that, unlike Real Estate Investment Funds, FIAGRO has an advantage because it is not obliged to distribute to its investors the minimum of 95% of the profits earned, calculated according to the cash regime, based on balance sheet or half-yearly balance sheet. Thus, the taxation of gains and income can be postponed until the moment of amortization, redemption or sale of shares, differently from what happens with Real Estate Investment Funds.

  1. Taxation of FIAGRO's portfolio:
  • Withholding Income Tax (IRRF) in financial investments: the net income and gains earned by FIAGRO on financial investments of fixed or variable income are subject to the incidence of Withholding Income Tax, observing the same rules applicable to legal entities submitted to this form of taxation.[20]
  • Capital gains earned by FIAGRO: as in the Real Estate Investment Funds, capital gains earned by FIAGRO are exempt from Financial Transaction Tax (IOF) and Income Tax (IR).[21]
  1. Taxation of income of quota holders:
  • Withholding Income Tax in the amortization or redemption of quotas: income and capital gains earned, when distributed by FIAGRO, are subject to the Withholding Income Tax at the rate of 20%.[22]
  • Capital gain in the sale and redemption of quotas: capital gains on the sale or redemption of FIAGRO quotas are subject to the incidence of income tax at the rate of 20% at source, in the case of redemption, or, in other cases, to the same rules applicable to capital gains or net gains earned in variable income operations.[23]
  • Due to the extension of Article 16-A of Law No. 8,668/93 to FIAGRO, it seems that the legislator's idea was to provide that the tax withheld at source may be offset against that withheld by FIAGRO, on the occasion of the distribution of income and capital gains. Thus, as it is better explained below, due to the veto in § 5 of 16-A of Law 8,668, the income tax withheld from the quota holders will be considered (i) anticipation of the due in the declaration, in the case of a legal entity beneficiary taxed based on the actual, presumed or arbitrated profit; or (ii) exclusive taxation, in other cases.

The President of the Republic sanctioned Law No. 14,130 in part, with veto of certain provisions[24], discussed below. Such vetoes will still be submitted to the National Congress, which has the power to overthrow them.

The exemption from Withholding Income Tax was vetoed for income earned by FIAGRO whose quotas are traded on a stock market or over-the-counter market and which are distributed to individuals. Similar to what happens with Real Estate Investment Funds, the initial proposal demanded that, in order to be entitled to this benefit, FIAGRO should have at least 50 investors, and the individual benefiting from the exemption could not have quotas that represent 10% or more than the totality of the quotas issued by FIAGRO, or whose quotas give you the right to receive income greater than 10% of the total income earned by FIAGRO. The reason for the veto was Art. 113 of the Transitional Constitutional Provisions Act, which requires that the legislative proposal that creates or changes mandatory expenditure or waiver of revenue be accompanied by an estimate of its budgetary and financial impact. It was also pointed out as the basis for the veto the Art. 137 of the Budget Guidelines Law of 2021, according to which the term of validity of tax benefit must be limited to five years[25].

Also, as mentioned above, a provision that provided for the deferral of the taxable event for payment of income tax arising from the capital gain on the quotas paid in with rural property by a natural or legal person for the date of sale of these quotas, or at the time of their redemption, in the case of liquidation of the fund, observing the payment of the deferred tax proportionally to the amount of quotas sold, was vetoed. This forecast would be a major driver for the sector, since it would allow the structuring of FIAGRO by rural owners in a less costly way, also considering the illiquidity of the assets.

Finally, the veto in § 5 of Art. 16-A of Law No. 8,668/93 makes the investment, through the FIAGRO structure, in Agricultural Deposit Certificate (CDA), Agricultural Warrant (WA), Agribusiness Credit Rights Certificate (CDCA), Agribusiness Letter of Credit (LCA), Agribusiness Receivable Certificate (CRA) and Financial Rural Product Note (CPR-F), unattractive, since it will not be up to the applicable Withholding Income Tax exemption applicable when the investment in these assets are carried out by individuals. Thus, it would be more advantageous for investors who are individuals to invest directly, in accordance with Art. 3, IV and V, of Law No. 11,033/2004, and not through a FIAGRO. Therefore, by virtue of the veto, the securities above that make up the FIAGRO portfolio will be subject to Withholding Income Tax at the rate of 20%. The Withholding Income Tax incentive is very similar to what was granted to the Real Estate Investment Funds to invest in these bonds, which was a great incentive for the wide adoption of the Real Estate Investment Fund.


[1] This law amended Law No. 8,668/93 to include this new form of fund within the norm that currently regulates the constitution and tax regime of Real Estate Investment Funds - FII.

[2] KRETER, Ana Cecilia; PASTRE, Rafael; BASTOS FILHO, Guilherme Soria. Carta de Conjuntura - Número 50 – Nota de conjuntura 29 – 1º trimestre de 2021. Instituto de Pesquisa Econômica Aplicada (Ipea). Published on March 31, 2021. p. 1, 4, 5, 6, 7, 9 e 10.

[3] Justification of Bill Project No. 5,191/20, presented on 11.18.2020. Author: Mr Arnaldo Jardim, Cidadania/SP. Available on:>. Access: 31.03.2021.

[4] Anuário UQBAR CRA 2021. Disponível em: Access on March 31,2021.

[5] Anuário UQBAR CRA 2021, ..., op cit.

[6] See Art. 3 and 20-F of Law No. 8,668, as amended by Law No. 14,130. Depending on the assets in which they invest, they may fit the definition of item V or IX of Art. 2 of Law 6,385 / 76, and, if they fit in item IX, they will need to have their first issuance of quotas offered publicly, just as the CVM understands that must occur with the Real Estate Investment Fund.

[7] See Art. 20-A, caput and items, and § 3 of the Law No. 8,668, as amended by Law No. 14,130.

[8] See Art. 5 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[9] See Art. 14 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[10] See Art. 8 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[11] See Art. 6, 7 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[12] See Art. 9 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[13] See Art. 7, §3 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[14] See Art. 12 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[15] See Art. 20-E, caput, e § 3º of Law No. 8,668, as amended by Law No. 14,130.

[16] See Art. 13 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[17] See Art. 20-B of Law No. 8,668, as amended by Law No. 14,130.

[18] See sole paragraph of Art. 20-B of the Law No. 8,668, as amended by Law No. 14,130.

[19] See Art. 10, caput, and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[20] See Art. 16-A, and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[21] See Art. 16 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

[22] See Art. 20-C of Law No. 8,668, as amended by Law No. 14,130.

[23] See Art. 20-D's Law No. 8,668, as amended by Law No. 14,130.

[24] Law No. 14,130(veto). Message No. 111 of March 29, 2021. Published in Official Gazette - Section 1 - 30/3/2021, Page 15 (Veto). Available in: Access on March 31, 2021.

[25] Law No. 14,130 (veto). Message No. 111 of 29 March 2021, ..., cit op.